Mergers and acquisitions are scary words.
Why?
Because … the process is overwhelming. With so many moving parts, stakeholders, legal challenges, timing issues, and — of course — that nagging feeling that you’re leaving “money on the table,” navigating a merger and acquisition can leave you feeling paralyzed.
To get you moving in the right direction, I’ve broken down the M&A process into its simplest form … three rounds with all the details.
Round 1: Identifying Prospective Buyers
- Contact prospective buyers
- Negotiate and execute confidentiality agreement with interested parties
- Distribute CIM and initial bid procedures letters
- Initial bid procedures letter:
- Defines time frame for document submission and information/material required
- Prepare management presentation
- Set up data room
- Prepare stapled financing package
- Receive initial bids and select buyers to proceed to 2nd round
- Valuation perspectives – strategic vs. financial
Round 2: Targeting and Executing
- Conduct management presentations
- Pitch client to prospective buyers
- Overview of target company
- Facilitate site visits
- Essential component of buyer due diligence
- Provide data room access
- Data room contains all info about all aspects of the target (business, accounting, tax, legal, financial, insurance, etc)
- Distribute final bid procedures letter and draft definitive agreements
- Distribute final letter to remaining prospective buyers
- Final bid:
- Outlines the exact date and guidelines for submitting a final, legally binding bid package
- Usually more stringent
- Definitive agreement: legally binding contract between buyer and seller detailing terms and conditions of the sale transaction
- Receive final bids
- Prospective buyers submit their final bid package to the sell-side advisor by date
Round 3: Final Closing
- Evaluate Final Bids
- Must weigh the binding nature of agreement (stable & lower price > unstable higher price)
- Negotiate with preferred buyer(s)
- Seller negotiates with two parties or more to settle issues
- Select winning bidder
- Negotiate a final definitive agreement with the winning bidder
- Presented to target’s board of directors for approval
- Render fairness opinion (if required)
- Is a letter opining on the “fairness” (from a financial POV) of the consideration offered in a transaction
- Supported by detailed analysis and documentation providing an overview of the sale process run, as well as an objective valuation of the target
- Receive board approval and execute definitive agreement
- Once the seller’s board of directors votes to approve the deal, the definite agreement is executed by the buyer and seller
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